Managing the Financial Side of Commercial Fleets

Pioneer Redefines Fleet Fundamentals

After creating its fleet department three years ago, Pioneer Natural Resources has
realized savings of more than $10 million per year. Standardization, leveraging procurement strategies, and telematics have helped generate these savings.

With more than 2,000 light- and medium-duty vehicles, Pioneer Natural Resources’ fleet group doesn’t just play follow the leader. The fleet’s innovative management team constantly challenges the status quo and looks for better ways to operate.

“There are no ‘best practices’ in our department,” said Anthony Foster, corporate fleet manager. “We believe best practices are a form of complacency; it was once a best practice to use a stone as a wheel. Instead, we focus on what is a good fit for our organization and how we can provide the safest and most cost-effective vehicles for our fleet.”

This operating strategy might seem surprising given the fact that Foster began developing Pioneer’s current fleet department in 2011 in an effort to lower fleet costs and better meet customer needs. Prior to the creation of a structured fleet department, fleet processes were left to the descretion of each operating asset.

Prior to Foster’s tenure at Pioneer, the company bought vehicles from multiple dealerships, sometimes taking up to six to eight months to reach drivers. Different makes, models, and colors of vehicles were being bought by different employees, resulting in higher costs on upgrades than were actually necessary. Pioneer was also not able to take advantage of volume pricing.

Currently, the fleet team’s cap agreement is tied to a better truck, and drivers typically receive their vehicles within 25 to 35 days.

The team has worked hard to develop acquisition, fuel, and maintenance practices. In fact, the creation of the fleet department led to a savings of more than $10 million per year, according to Foster.

Helping to Fulfill the Company Mission

Headquartered in Irving, Texas, Pioneer Natural Resources operates in Texas, Kansas, and Colorado. A $28-billion company with 4,100 employees, Pioneer is a large independent exploration and production business that produces oil and natural gas.

The fleet team helps ensure the safety of each company driver by assessing vehicle specifications and design, and implementing key safety features into the specs, including back-up cameras, proper mirrors, and all critical safety functions.

“We try to put ourselves in our customers’ shoes and ensure we have the most reliable, safest vehicles available,” Foster explained. “Many companies spend more money on ergonomics at the desk instead of behind the wheel. But, driving a vehicle is the most dangerous job in our company, so we constantly challenge ourselves to effectively meet customer needs and keep them safe.”

Building the Fleet From the Ground Up

Foster has been in the automotive industry for the past 20 years, with a focus on fleet operations for the past decade. Pioneer’s fleet department is the third one he has built from the ground up for an oil or natural gas company.

At Pioneer, Foster has focused much of his time and energy into asset management. He created the current protocol for ordering and disposing of vehicles along with fleet standardization.

He has has been a key player in Pioneer’s compressed natural gas (CNG) vehicle initiative and has spearheaded adding GPS into each vehicle to better assess driver usage and create a process of checks and balances for the drivers.

Foster works with field and senior management, taking a 360-degree approach. The fleet team weighs all factors when creating departmental initiatives, including employee morale, company image, financial cost, and technology. He believes that some fleet management teams get stuck in a paradigm that limits their ability to manage effectively.

“We don’t want to be one sided, so we challenge everything. Standardized ‘best practices’ don’t allow for flexibility,” Foster said. “For example, I was content with offering white vehicles, but found out that silver is safer and provides a better resale value. So, the days of black and white are over within fleet.”

Foster emphasizes transparency as the key for the company’s young fleet department, which must be a champion for change. Dedicated to safety and operational excellence, Foster works day to day with Kate Walden, corporate fleet specialist; Lisa Woods, corporate GPS administer; Greg Edney, corporate fleet analyst; and Ed Hance, VP of corporate procurement.

Teamwork is a major operational strategy at Pioneer, and, while many fleets operate from the top-down as centralized units, Pioneer follows a different path.

“We are decentralized and our internal team members each operate as entrepreneurs, sharing information and debating about fleet practices,” Foster stated. “Each of us makes the strongest case for what’s good for the entire group.”

The company’s fleet department doesn’t have hard policies. However, it does rely on a fleet committee to provide more guidance for the enterprise as it grows and moves forward.

Working with Senior Management

The fleet department reports directly to procurement. Within this structure, Foster and his team can take advantage of procurement strategies and the overall cost perspectives provided from the finance division. Foster works directly with Hance, who reports directly to the company’s CFO.

The fleet team also leverages the company’s third-party logistics partnerships with more than 100 different carriers for its multiple divisions and subsidiaries.

“We operate almost like a fleet management company,” according to Foster, adding that this operating strategy is significant in helping the company save money.

Senior management plays a key role in the company’s fleet success. Foster and his team deliver a quarterly fleet report to senior management documenting all initiatives, vehicle and inventory summaries, fuel trends, and financial expenses, as well as key performance indicators. They also deliver a driver efficiency report illustrating time spent in transit, idling, and at work sites, field offices, and fueling stations.

A fleet overview is given to Pioneer executives each quarter, and the most recent overview from the fourth quarter 2013 included the following key results:

Total vehicle count increased 3.8 percent, due to the addition of well services and pumping services’ heavy-duty vehicles.

The average acquisition costs decreased 13.3 percent due to a reduced amount of CNG vehicles deployed to the field.

Average resale price increased 4 percent, due to the annual rise in used vehicle prices in the fall and the sale of more recent model-year spares/pool vehicles in Trinidad.

“Once our customers have been educated on the overall value of these projects, we seek management committee approval to proceed,” said Greg Edney, corporate fleet analyst. “We sell the idea and relay how it provides value.”

Choosing the Right Vehicles for the Job

The organization’s owned fleet includes primarily truck models with a few cars, vans, and SUVs. Standardized Ford XLT F-150 Crew Cabs and Ford XLT F-250 Super Duty models are offered to the entire fleet no matter the employee’s position within the company, representing about 85 percent of the total fleet makeup. However, a total of 45 vehicle specifications are offered to drivers, because each vehicle is tailored for need.

“While the bulk of our vehicles are ¾-ton F-250 short-bed Super Duties, we must be flexible enough to offer other specifications so that all of our personnel, from administrative to electrical, have the right vehicle,” said Walden. “When operational needs change, we adapt.”

Walden emphasized the importance of not hampering job function due to limited vehicle specs. So, if a driver needs, for instance, a Ford Explorer or Ford Expedition, the fleet department offers those vehicles as well.

“A strict ‘cost-focused’ perspective may be to buy a less-expensive truck with a lower payload and GVW than is needed, in the long run; however, that improper vehicle choice will cost you more because of downtime,” Foster pointed out.

Securing the right vehicle requires the fleet manager to leverage an effective communication method or tool. To do so, Pioneer created a vehicle request and specialty body request form, which show payload availability with catalogs for each potential option to ensure proper GVW and maximum payload capacity.

The first consideration when selecting a vehicle is determining which OEM meets the bulk of the fleet’s requirements, including function, durability, availability, and cost considerations. Next, Foster reviews which vehicles can be utilized by function rather than status.

Implementing Driver Connectedness

The fleet team implemented an innovative communications initiative, called Project Connect, in an effort to allow drivers to be better connected from the field and decrease the need to drive more miles.

“Our drivers look at their vehicle as a hub and their mobile office,” said Woods. “So, while sitting in his truck, a lease operator can fire up his laptop or tablet and access a single client through a virtual private network. It’s exactly the same access they would have if they were sitting in an office.”

Operating this way gives the driver the ability to reduce trips from the field to the office to upload or download data. Project Connect has the potential to significantly reduce the number of miles driven and increased the number of wells that the company can service.

Using Telematics to Get Results

Another key initiative within Pioneer’s fleet department is the use of telematics in all light-duty trucks, which has the potential to allow the fleet to be more operationally efficient by doing more work with less people, burning less fuel, and being safer.

“From a safety perspective, for both the drivers and the community the company operates within, we analyze specific key performance indicators, including excessive speed, hard

braking, harsh takeoff, seat-belt usage, and idle time,” according to Woods. “This helps us measure how each of these come into play during an accident.”

It also allows the company to realize environmental benefits, such as reducing time spent in transit, idling, the number of stops at the field office.

These efforts all lead to fewer overall miles driven, less fuel consumed, and less wear and tear on the vehicle. Since implementing a telematics solution, Pioneer has seen valuable improvements in driver behavior, including a decrease in speeding events, an increase in seat-belt usage, a decrease in hard braking, and a decrease in harsh acceleration.

“The reporting of these metrics allows the foremen and supervisors to coach their drivers, who then become more focused on each of these driving areas,” Woods explained. “They realize they need to be a better driver from a safety perspective, not only for the company, but for themselves, their family, and the community.”

Since implementing telematics, the fleet team has made a big effort to communicate to drivers that telematics is not about Big Brother.

“We have been completely transparent with this initiative and have given more than 350 users access to the tracking system,” Foster said. “We clearly define the metrics, including putting specific parameters around things, such as defining hard braking, etc. Pioneer field employees focus on operations excellence.”

Continuing to Challenge Processes and Practices

Other key initiatives at Pioneer include the deployment of CNG-dedicated and -bifuel vehicles, a dedicated Intranet fleet portal, an employee vehicle purchase program, and the possible integration of NAPA Integrated Business Solutions Program.

Remaining proactive keeps the fleet organization at the highest level possible. “We operate the best fleet organization out there,” Foster said. “And, by continuing to push the boundaries, we will reduce costs even more while operating as efficiently as possible.”